Skip to main content

tv   The Call  CNBC  January 14, 2010 11:00am-12:00pm EST

11:00 am
i'm john harwood at the
11:01 am
white house where within the hour president obama is going to announce his financial crisis responsibility fee and here's an indication of how much he relishes this fight. in the statement the white house has put out previewing his remarks he indicated that banks are making massive profits and paying obscene bonuses and this president is eager to join the fight over this tax. >> i think he's going to get one. i think he's going to get one, john. >> all right. >> it will be a fight, but i think he'll likely win it. >> one report, and this is something that i had seen jamie dimon from j.p. morgan chase quoted as saying yesterday. he said we're going to pass this along and the administration officials said it would be beyond the pail to pass it along. there are battle lines being drawn. >> well, that's ridiculous. >> there are battle lines being drawn, guys, but it was that easy topay pass along the tax why would banks fight it so
11:02 am
much? >> they don't like it in principle. >> my god, you can build that into your business model. it's ridiculous to say it would be beyond the pail. we've got to go. hopefully we'll debate the whole thing tomorrow because it's interesting. >> it really is. see you later. welcome to "the call." i'm melissa francis" we are 90 minutes into the business day and stocks are mixed after inventory data and weaker retail sales and jobless claims are fueling concerns. we'll break it down momentarily. >> i'm larry kudlow, top regulators are testifying before the financial crisis commission on who dropped the ball and how to avoid future meltdowns. is more regulation really necessary? we'll discuss it. >> the huge story dominating wall street today. president obama will speak live to announce what the administration is calling -- i love this. the financial crisis responsibility fee. we'll call it a bank tax because that's what it is. >> taxes! >> coming up at 11:50. can't miss what's ahead here on
11:03 am
"the call." death and taxes. stocks opened flat on economic concerns coming from weaker-than-expected retail sales and jobless claims. we have business inventories that came in and boosted the market, a high hope ahead of intel's after-the-bell earnings also fueling today's gains. right now take a look at how the s&p is trading and trading to the down side and it's about a point and a half, 1144. take a look at how the dow is trading and it's moving into negative territory after rebounding back there. it's flat on the session and technically it is in the red. 10,680, the nasdaq right now is trading to the downside as well. basically flat, bob pisani, we want to check in with you on the floor. everybody excited about this what we're not calling a bank tax somehow? financial crisis responsibility fee whoever wrote that deserves an academy award or something. >> it is a bank tax. if you're wondering why it drifted lower, it drifted lower
11:04 am
as the details came out about the bank tax each though we knew it was coming. they're drifting lower for the last hour and that's yet market is moving a bit to the downside. yes, people here think it is a bank tax and people are wondering gee, why aren't the companies who haven't paid back their money, the gmacs of the world in this? let's talk about the global economy was improving. i was cheered to hear what rio tinto said this morning. 49% increase in iron ore production. they see continuing high demand from china, but the ceo went out of his way in the first paragraph of the statement in the quarterly report of production, we're seeing recovery across most of our key commodities, yes, iron ore has been a big mover on the upside because china needed it and in other areas like aluminum it's improving. the iron ore companies, that's good news for them and however, they'll charge more in 2010 and china is in a big fight with them and has been for a long
11:05 am
time with the iron ore companies. this isn't necessarily good news, and higher costs for steel companies and the steel companies have been under a little bit of pressure here today. elsewhere, there's discussion about why, gee, why do we have a slightly lower start to the year? we've had two weeks of pretty low volume and pretty low volatility, but we're at 15-month highs on the s&p 500. there's still no real retail stock inflows and hasn't been, and professional opinions divided about wah we will move higher or lower and we're still at 15-month highs and the bottom line, larry, when you get limited selling like we've seen in the last few week, even modest buying will move the markets forward and that's why we're continuing to drift upward right now. back to you. >> thank you, robert pisani. mixed data on the economy this morning. retail sales a little soft, but a big silver lining in big gains and huge gains in business sales. cnbc's steve liesman is senior economics reporter.
11:06 am
he has the numbers and he is going to give us the rundown. good morning, steve. >> some day we'll get the junior economics reporter to do this, we all know there is none. retail for december did come in below expectations -- >> larry! >> larry is my junior, right. retail numbers came in on the wrong side of the zero line and revisions to november took the sting out of the data and we got good fourth-quarter data. down 0.3%. economists looking for down 0.2. we'll talk about that in a second. november was revised 0.1% higher and 5.4% year-over-year growth and we'll take that any day. autos, curious, the retail sales saying they spent less money on autos, but the unit sales reported by the company companies was higher. so unclear there. internet did well. that's a plus 10% on the year on year. electronics down, gasoline up, but not as much as some expected and clothing up -- sorry, down, 0.6%. let's turn to the jobs data which did come in worse than
11:07 am
expected. initial claims 444,000 and some economists say we were due for a rebound, given the rebound to the upside given the huge gains we had. up 11,000 from the prior week. the four-week moving average ticking down. let's look at the unemployment rate. look trat jectry of the decline there and compare it to the secession the last time around and what you see is the numbers were far higher, but the improvement is much greater. that to some economists says hey, we may have a better jobs rebound than the last time around which, by the way, was want very strong so it will not be that hard to week. look at the claims on the non-seasonally adjusted basis, 260,000 and 1.6 million if you include november and december. that includes the government programs, extended benefits and emergency claims. macro economic advisers keeps a running total of how the data affect its gdp forecast putting november and december along with the inventory jump larry mentioned, november shows -- november and december shows the
11:08 am
fourth quarter on track for 5.5% growth. not too bad, larry. >> you know, that business sales number, i just want to pause for one second, that is also a profits proxy number because sales are top -- >> you can tax it, i think. >> i didn't expect that from my junior. >> i like playing the role of junior. it's very humbling and i want you to hush up because you'll stay with us and we'll come back to you in a moment? yes, sir. >> retail and jobs is soft. i don't each want to read that thing because the unemployment claims on the four-week average which is what matter. >> the trend is good. >> speak of good, we have dean baker, economist for the center of economic and policy research. we have randy connick, specialty and retail analyst at jefferies. >> and steve. >> and steve liesman will be with us. >> dean baker, good morning, my friend. happy new year. dean, you're looking at 5%, 5.5% growth in q4. my question is can it be sustained into the new year? >> well, it's very hard for me
11:09 am
to see how that's going to be sustained. i'm skeptical of the 5%, 5.5% and we'll have to see what comes in on the import side because a lot of those inventories are imported. in my mind the big story is the economy depends on consumption which in turn is related to jobs growth. if we're losing 440,000 jobs last week the unemployment claims will see negative job growth for january. when does that start turning around to be positive? until we start to see positive job growth we're not on a sustainable growth. ? no, that's the lagging indicator. we see inventories and we see sales and we see other things moving in a positive direction and unemployment follows that, right, steve? >> i think that's usually the case, and i think it might be even more so the case this time around because of the concerns about corporations when it comes to their own books. we have these fortress balance sheets on the part of corporations and we saw just a little bit of a sliver and a crack in the fortress which we had target getting back on the train of buying back stock. what happens to that money, i
11:10 am
think, will be the determining factor for what happens to the economy. >> randy, let me just ask you, i want to get your read because you're a retail analyst. on this issue, if jobless claims are falling as they are steadily and businesses are rebuilding inventories and their sales are surging, doesn't that mean, in a sense, business is leading and you will create more jobs and that will create more consumer spinni spending. in other words, supply creates more demand. is such a thing possible? >> as john baptist wrote that in 1801. >> you may both be headed in the same direction. >> dean, i've got to give randy first. we have to give him equal time and i'll in back to you. randy, if business is doing better, let me rephrase this, does that mean consumers and retailers will do better? >> yeah. i think over time that will take place. however, in the near-term we're going to be seeing some
11:11 am
choppiness. consumption was very strong in november. i think sales were actually pretty good in december and i was talking to companies at the conference thus far in january and we're hearing january is off to a decent start and our concern with the retailers heading into 2010 is more of how much of a recovery do we get in spending given that expenses will start to rise for a lot of these retailers. >> dean baker, what's your objection? i'm just saying if business is recovering -- >> seems logical. >> the consumer -- >> i would go with the great depression, larry, but let's step aside from that at the moment. unemployment claims are down from, you know, 660 and 670 where we were last year at the peak, but 440 is still very, very high unemployment claims and that's not consist wept job creation. we typically have to get under 400. if you look back to 2002 and 2003 we didn't generate jobs am weekly unemployment was under 400. >> we hear you and we agree with
11:12 am
you. all we're saying if companies are replenishing inventors on, eventually they'll have to hire people, right? >> well, no, they'll have to have those inventories bought and it's not clear that that's going to be the case. so you get a one-time -- you get a one-time boost to inventories, but if they're not seeing the demand being generated you will want continue to increase production. the other point, keep in mind, we lost a huge amount manufacturing. much of the inventory growth is being generated from china. it's not being produced here. >> yeah, luckily we have a retail specialist standing by. randy, what do you think about that? are those inventories going get bought and does it make a difference that things are being replenished in china. we don't make the stuff here and apparently we don't have to hire anyone to sell the stuff, either. >> i think it is at a slower pace. the problem with the u.s. consumer right now is there's a lot of lack of clarity with the u.s. government on different policies and different things coming out every day. >> great point. >> we need some clarity on what's going on with the u.s. government as far as the
11:13 am
policies affecting either the companies they work for or affecting their employ chlt prospects. we will see a slow and choppy recovery with consumer spending which will be a problem for the retail stocks. >> i have no idea what my financial crisis responsibility fee will be. >> i'll give you a tax cut at the end of show. >> i need a tax cut. >> whatever. >> what you neglected to have is the import prices. yes, the overall was flat. the last three months the overall is running about 10.5% at an annual rate and in december, excluding fuels, import inflation was up 0.4% as it has been in november and october. here ate kudlow theorem. a cheap dollar is inflationary and inflation is the cruellest tax of all on the economy. why didn't you mention this import price concern? >> because i was given 1:15 by jen in the back and -- and this script here took 1:15, larry.
11:14 am
>> so would you like to add it now? >> the overall number was flat and import price -- imports are about, what? 15% of the u.s. economy? >> they correlate falsely with consumer prices, my friend. >> i disagree with you on that, larry. >> the u.s. is a pricemaker, not a praise taker. >> the u.s. is such a world open trading economy now. we are the world. we are the world. >> we are the world, exactly. we're the biggest one out there. i guess junior and senior will disagree on this. >> dean baker, let me ask you for your opinion on the fed. i know you're not a big fan of ben bernanke and his cover-up of the fed's role in the bubble. are you concerned that the fed says rates are too low right now. >> think he's doing the right thing with policy. we have a weak economy and you have to do whatever you can to boost it. it is a scandal and ben bernanke bears much of the blame that we have 10% unemployment, but given
11:15 am
10% unemployment we should be doing everything we can on the fiscal side or the monetary side to get the economy going, so i say it's the right policy right now. >> you're absolving mr. bernanke. >> not really. >> i give him credit for when he does something right? that was mixed. >> can i ask for 1:30, next time? >> want some of the snacks that are behind randy. >> i just want to -- >> we've got to go! >> i think the import price inflation -- >> oh, goodness. >> it is something to keep your eye on, that's all i'm saying. we live in an open economy and we've experienced this before. melissa, over to you. >> earnings that president obama's bank tax proposal. what's at state for the markets? a bull and bear weigh-in coming up next. >> indeed. ahead of the president's announcement on the bank tax. >> it's a tax. no way around. >> a beatdown, i love that. that's coming up only here on "the call." we give all economists full running room.
11:16 am
11:17 am
11:18 am
hi, folks. welcome back to "the call." i'm matt nesto with "the real time flash." one of the companies in the country is not very happy this morning. fpl, florida power and light, getting largely rejected on a rate increase overnight saying that the state is not a positive
11:19 am
place to do business and, that the regulatory environment is deteriorating. the volume is more than it does in a ten-day or 200-day volume. the company saying they will cut $10 billion of planned capital expenditures over the next five years. they're reviewing their cost structure and their other operations for more possible rate cuts and they're seeing multiple earnings per share in downgrades and one of the worst percentage decliners in the top ten and percentage decliners in the s&p and also right on top of the list for volume surprises. so fpl cutting way back on their planned capital expenditures after not getting that rate increase from the cold state of florida where i'm sure they'll want their electricity working if they see that cold spell again. melissa, back to you. >> i think that's absolutely true. matt nesto, thanks so much. narcotics digesting mixed economic data. the market is awaiting president obama's new plan to tax the living hell out of banks. the markets prove to be resilient and go higher or are we in for a pullback?
11:20 am
let's ask the president of heritage capital and chairman of canaly trust company. thanks so much for joining us. what do you think? are companies going to go out and make money if they think the government can come along and make up a new tax and take any new profits they have away? a little bit of a leading question, but you know where i'm going. >> why not tax everyone 100% and solve the problem? >> it's a great idea. >> it is so absurd. >> i think it's been debated. >> the banks have their own problems. the banks, some of them are forced to take t.a.r.p. so the ones that paid back t.a.r.p. got rid of the warrants are now going to be taxed again. gm and aig and gmac nothing happened. it's absurd, number one. >> and fannie and freddie get a free ride. >> number two, what will happen to banks? they'll pass it on to two? low and middle-income people. >> right. >> essentially the government's kaut called a surcharge, a tax code, it's bad for the country and bad for low income and bad for middle incomes and the
11:21 am
markets won't care yet and they'll care later in the year when they have more taxes. >> we're beating it to death. >> can't help it. >> she started with me at 7:00 a.m. in the morning. >> at 4:10, i e-mailed larry. i can't take it. i want to ask you about bank stocks because when the news dribbled out, i believe it was tuesday. the bank index went down 3% and they did better yesterday and they're down again today, and i just want to ask you, i don't think we can have a good bull market unless financials lead the way and maybe you'll disagree. what's your take on this. >> bank lending is down, isn't it? if you tax something you'll get less lending and so we'll find ourselves debating this issue probably for the remainder of the year because the environment for business is not getting better, is it, larry? >> in stock market terms, drew. yes, i a agree with your analysis. in stock market terms is this a one-time hit on bank stocks or is this just something that's going plague them as the year goes on.
11:22 am
>> think about it. you have a mechanism in place called fdic insurance. if you really want to put something in that will have some lasting effect that would be it, but instead you have a political solution, right? which probably leads to more political solutions down the road. so that's what the market should be looking at a head's up down the road at what other political solutions will we throw at this system. >> paul, tell me how to make money right now. maybe i'm just going go ahead, make money and quickly flee the country so i can avoid whatever taxes come my way and hold on to my money. how do i make money right now? >> make as much as you can and go elsewhere. >> immediately. >> but where are you going to go? they're all doing it! >> i was asking what stocks to buy. i was trying to make the segment a little bit legitimate about the bull/bear debate. what should do i? >> i think the market is setting up for a normal, healthy pullback, 6%, 7%, maybe we have a percent or two on the upside in the next week to ten days.
11:23 am
i think we pull back 5% to 7% in the end of february and we literally load the boat for one final rally into the sum wher we get to dow 11-5 to 13,000. >> wow! >> i think it will be fairly broad based, semiconductors, energy services. i happen to like utilities even though there is bad news today. i think a lot of sectors will participate in the last rally. financials i haven't been part of in years and years. i still can't get my arms around them so i'm looking to avoid them totally. >> it's still worth noting, though, with the tax burden, and i agree with what you all are saying lord knows and melissa is has been slamming me, not like i'm in favor of this, but the yield curve, drew, is so steeply upward sloping. >> i know. i don't want you to make this point. >> even borrowing at 0 and lending at 3%, 4%. i just want to be fair and balanced. >> yeah. it's fair and balanced. >> interest rates will go up this year and we'll have more treasurys coming into the
11:24 am
marketplace. >> yeah. >> the anchor is zero. >> for the federal reserve they dry up in march so interest rates are going to go up this year and the way we're looking at it is we'll see some follow-through here in the first half of the year. the stimulus is still in place and there's still good news to come, but when we start looking at 2011 it is dark clouds and we'll have a really tough market, probably in the second half of this year. >> we have to leave it there. thanks to both of you for joining us. that is a good point although jamie lloyd would say i can make things higher or low. >> thanks to you for helping us. >> coming up in the next segment. day two of the wall street meltdown. regulators are on the hot seat. we're live with details from capitol hill. >> here comes your responsibility fee. but first, gas prices are not garnering enough attention as they climb toward 3 bucks a gallon. did you notice? will this derail the consumer rebound in the energy call is coming up next and we'll be right back with your crisis responsibility fee.
11:25 am
[ birds screech ]
11:26 am
[ loud rumbling ] [ rifle fires ] [ announcer ] if you think about it, this is what makes theladders different... from other job search sites. we only want the big jobs. join theladders.com. only $100k+ jobs and only $100k+ talent. and now, all premium members get a free résumé critique.
11:27 am
11:28 am
welcome back to "the call." i'm brian shactman at the new york mercantile exchange. crude oil down 25 cents or so. retail sales being a drag there. i want to talk about natural gas, a pretty big sell-off despite a drawdown in stocks, just eight bcf off the all-time record. the whisper number was for much higher than that. we'll see if that holes up. i also want to look at reformulated gas up almost 80% in the last 12 months and obviously, that leads into retail gas, and i just want to share with everyone according to aaa what the prices are. today it is about 2.76. you compare that to 1.79 a year ago and raises the questions, are we going higher? how high will it go and at what point will demand destruction get back into the conversation and to address those questions. of course, let's send it back to melissa. >> thanks so much, brian.
11:29 am
will a rise in gas prices derail the rebound of the consumer? let's ask stephen shock and chris pounder, president of caprock risk investment. stephen, gas prices have really snuck up on us and they're up a buck since october 2008. first of all, is this going to continue? >> it's all a function, melissa, as you know of the price of crude oil. let's be frank about this. crude oil is too expensive given where retail gasoline prices currently are. in the fourth quarter, gasoline prices averaged $2.60 at the pump, but as chevron, the second largest oil company just warned the other day, they couldn't make money in the fourth quarter with gasoline at $2.60 and crude oil at $70 a barrel. now crude oil is up around $ 0 a barrel. we're hearing talk that it could go to 85 or $90 a barrel. you have to remember, melissa, there's only one guy in the world who buys crude oil and that's the refiner. my question is if chevron and other oil companies could not
11:30 am
make money with $70 oil in the fourth quarter with retail gasoline prices at $2.60. how are they going to make money at 80 and 90 and people are talking about $100 this year for crude oil. >> chris jarvis, we need a response, a, where is the price of crude oil going which is where steve sen centering it and b, what is the oil outlook for the oil companies themselves? >> agree. i think in the short term, the crude oil has downside risk to the market and forget the $72 level. i think you will see utilization rates come way off like we did earlier in the year and that's why we've seen inventory to come down. i do expect it to come down over the near-term and over the holiday we could be at $09 a barrel quite easily. just let me follow up on that, chris. a, china. there's a big debate, chanos, jim chanos is saying china is a big bubble and it will deflate. others say the emerging economies around the world are
11:31 am
very strong and of course, guys like me and others say there's a mini boom coming in the usa. is that bullish for oil or has oil already reflected that economic growth? >> no, i think it's very bullish and the thing that's been driving oil prices as well as the recovery has been more so the dollar. so i you continue to see the dollar continue to weaken, dollar-based commodities will rally and couple that with strong demand in emerging markets like asia and china, that's a bullish setup for crude oil. stephen if we do get to 90 bucks or above $3 a gallon by the summer what does that mean for the consumer? will it take a toll? we saw $3 bucks before and lived through it. >> so, no, we couldn't handle it. >> that wasn't because of oil, though. it wasn't helpful. >> it was a big part of it. hold your ground, steve! oil shock say huge part of that. hold your ground, buddy. >> that's ridiculous! >> don't let her push you around, steve. >> i'm not! >> no, we're talking about
11:32 am
gasoline prices, melissa, at the height that was 4.5% personal consumption expenditures so that's a full percentage pint above it, so every penny that we have to pay for an inflated price of gasoline is another penny we don't spend elsewhere in the economy. >> it's the most underrated part. you get the nobel prize today. you get the nobel prize today, without question, that's key. chris, what if the dollar strengthens? i just want to go through your other scenario. people say strong american growth, good for the dollar. europe is in trouble, germany is reporting trouble today. japan has been in trouble for many, many years. if the dollar goes up, does oil go down? is it that simple today? >> i think it is that simple and fundamentally crude oil prices will be really supported where they are today. a lot has to do with the dollar, and i believe over the couple of months and non-farm payroll data will actually continue to improve as these data points improve, i do think the dollar is strengthened, so it can take the steam out of the commodity trade in the first quarter of
11:33 am
this year and going into the summer we'll see $09 oil. >> we've got to leave it there, guys. thanks so much for joining us. we appreciate it. we're getting a lot of e-mail from people fired up about the bank thing. some sympathize with the banks and a lot of people saying the bonuses were stupid and they're obscene so of course, they'll get the money. send the e-mail, we're heading them. >> if you hate the bonuses, don't raise taxes, just deal with the bonus problem. coming up, are the big banks under attack? >> gee, i wonder. >> duh! president obama's live announcement on the new bank tax. >> the commission holding another round of hearings, grilling the top regulators on the financial meltdowns. the highlights and the key question, is more regulation over wall street necessary? that's straight ahead right here on "the call." we'll be right back. o stay long. now? you don't have enough time... and you have to push all those buttons... no buttons, someone answers every time. yeah, right... bet you a massage... yeah, ok. hi, julie...
11:34 am
i have a question about my points. hi, what button do i press for a massage? hello? new chase sapphire... you call. we answer. no waiting. just press right here... go to chase.com/sapphire. chase what matters. ♪ [ male announcer ] introducing the all-new lexus gx. ♪ it has the agility to avoid the unexpected... ♪ ...the power to take on any mission, and the space to accommodate precious cargo, because every great action hero needs a vehicle. ♪
11:35 am
11:36 am
you are watching "the call" on cnbc and we are watching the situation in haiti. the tragic situation through the global resources of cnbc and nbc news. i'm scott cohn. the haitian red cross believes now as many as 50,000 are dead, but 3 million may be hurt or homeless. president obama committing $100 million in relief from the united states, says haiti will now be a top priority for all federal agencies.
11:37 am
>> today you must know that help is arriving, much, much more help is on the way. >> indeed, aid from around the world is flowing into the region from governments, businesses and relief organizations. 2200 u.s. marines and 3500 army troops are deploying to haiti right now. a second 72-man urban search and rescue team from los angeles hit the ground this morning. and at the request of president obama former presidents george w. bush and bill clinton have agreed to help the haiti relief effort. mr. clinton and the first president obama teamed up after hurricane katrina in 2005. more as we get it and always from cnbc.com we say it often, our audience is very generous in times of crisis when called upon to help and this is one of those times. >> thank you very much, scott cohn. >> one day after bank executives received a grill on capitol hill, sheila bair, among the regulators in the hot seat today
11:38 am
as the committee is investigating the financial crisis and it holds its second day of hearings. cnbc's diana olick is in washington with the latest update. hello, diana. >> hello, larry. yesterday it was the bankers and today it's the regulators. members of the financial crisis panel pressing the heads of the fdic and securities and exchange commission as well as attorney general eric holder as to how lack of regulation contributed to the crisis. >> in september of 2004 the fbi warned or it was the head of the criminal division of the fbi, the assistant director, washed about a quote, unquote, epidemic of mortgage fraud coursing across this country, and indicated that if it went unchecked it could end up with a financial consequence as a crisis as large as the snl crisis. what steps were taken in the wake of that 2004 fbi warning?
11:39 am
foo we are constantly in the process of reviewing that which we can do better. i am not familiar myself with that statement. >> now, holder seemed to want to direct attention to deterring future dangerous financial conduct, but fdic chairman sheila bair who was an early critic of the subprime mortgage market admitted freely that the regulatory system failed in its responsibilities. >> where is the primary responsibility for choking off the development of these subprime products that ended up polluting our financial marketplace? >> of course, hindsight is always 20/20, but, yes, looking back i think if we'd had good, strong constraints at that time, just simple standards like you've got to make a loan and document aye an income and make sure they can repay the loan and at the reset rate as we, we could have avoided a lot of this. >> the scic will have access to company-specific ask regulatory documents according to today's witnesses. the next panel includes state law enforcement officials. larry? >> all right, diane a thanks very much.
11:40 am
so do we need more regulation over the financial system and what kind of regulation? joining us, ken benson, executive vp of public policy and advocacy from sifma. ken, all right, just give me your first take. too big to fail? transparent derivatives on public exchanges and things of that sort or is it going to be really, really broad based? >> i think we have something to eliminate too big to fail and there needs to be a systemic risk regulation and there needs to be a mechanism to deal with aig or lehman-type fail urs to control the wake of a systemic risk failure at the same time to say that no institution is too big to fail. so, yeah, we think that that's necessary and there does need to be transparency and we think also what's important, larry, is markets evolve and you know this better than anyone else. regulation needs to evolve along with the markets, and i think that's what hopefully the thicket, the fcic commission will find that there will be an
11:41 am
investigation to find out what went wrong, where signals were missed, how regulation could be more streamlined and more effective going forward and as markets continue to evolve. >> you know, ken, sheila bair highlighted one of the biggest problems we had in the cries, the no-document loan, it's one of the problems that caused this problem. i would say before a market would take care of that because what bank would make that loan? obviously the market didn't work in this case. who should have been watching that and how should we fix that? >> i have a little bit of experience because i spent time in the house financial services committee and raised questions back in the eight '90s about whether or not the regulator his sufficient underwriting criteria or monitoring underwriting criteria of financial institutions in this, but all of this got beyond the capacity of the regulator and, frankly, the risk management system and the financial instewings. >> just break down that one for me. was that hud? give me a name. >> think it would have been a combination.
11:42 am
i think it would have been the bank regulators. look, you can't expect the bank regulators to look at entire retail loan book, but there could have been screens in place. >> ken, let's step back to where melissa is really going here. hud rules and quotas for unaffordable mortgages and fannie and freddie did the underwriting and putting them in their portfolio. i am astonished that the two words fan and fred have not come out yet in this -- not just the discussion we're having here on this show, but in this hearing. fan and fred. i cannot believe they're not zeroing in on that because that there is one of the roots of the problem. >> all right, look, larry. this commission will go on for some time and i assume this is part of their agenda that they'll go through this. so we're on for a two or three-minute segment of your show and there's a lot to go through, but i think all of this should be looked at and not in the form of an acquisition and i don't think that's the intention of the chairman angelides or bill thomas, but in a way to inform the congress and
11:43 am
policymakers of what they need to do going forward. >> thanks for joining us, we appreciate it. >> and the financial problems are huge. let us move on. >> plenty of blame to go around. >> i understand, but fan and fred, anyway. a taxing proposition for wall street courtesy of the white house. >> we're waiting for president obama about his plan to tax banks and hopes of recovering losses from others in the bailout. he's coming up shortly right here on "the call." reel be right back.
11:44 am
11:45 am
11:46 am
>> all right. president obama getting ready here to speak about the tax plan. let's listen in. >> firms took reckless risks in pursuit of short-term profits and soaring bonuses, triggering a financial crisis that nearly pulled the economy into a second-grade depression. it was the more than a year ago that we stood on that precipice, and several of the world's largest financial institutions had already failed, credit markets froze and banks refused to lend. trillions of dollars in household savings evaporated as stocks, pensions and home values plummeted, and we were losing hundreds of thousands of jobs each month. it was at this time that many large, financial firms, those left standing teetered on the brink of collapse overwhelmed by
11:47 am
the consequences of their irresponsible decisions. even though these firms were largely facing a crisis of their own making, their failure could have led to an even greater calamity for the country. so the federal reserve and other agencies took emergency measures to prevent that outcome and the previous administration started a program, the troubled asset relief program or tavrp to provide these financial institutions with funds to survive the turmoil that they'd helped unleash. it was a distasteful, but necessary, thing to do. we've worked over the last year to manage this program effectively, to hold firms accountable and to recoup as much tax mono aez possible. many feared that most of the $700 billion in t.a.r.p. money would be lost, that because the management of this program by secretary geithner and my economic team, we've now recovered the majority of the funds provided to banks. as far as i'm concerned,
11:48 am
however, that's not good enough. my commitment is to the taxpayer. my commitment is to recover every single dime the american people are owed. and my determine to achieve this goal is only heightened when i see reports of massive profits and obscene bonuses at some of the very firms that owe their continued existence to the american people. folks who have not been made whole and who continue to face real hardship in this recession. we want our money back and we're going to get it and that's why i'm proposing a financial crisis responsibility fee to be imposed on major financial firms until the american people are fully compensated for the extraordinary assistance they provided to wall street. if these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers. now, our estimate is that the t.a.r.p. program will end up costing taxpayers around $117
11:49 am
billion. obviously, a lot less than the 700 billion that people had feared, but still, a lot of money. the fee will be in place for ten years or as long as it takes to raise the full amount necessary to cover all taxpayer losses. this will not be a cost borne by community banks or small financial firms, only the largest firms with more than $50 billion in assets will be affected and the size of the fee each bankes on will be based on its size and exposure to debt so that we are recovering tax dollars while promoting reform of the banking practices that contributed to this crisis. now the fact is these financial institutions are essential to our economy. they provide capital and credit to families purchasing homes, students attending college, businesses seeking to start up or expand, and that's yet rescue program was as necessary as it
11:50 am
was unfortunate. and that is why through this fee and broader reforms that we seek, our goal is not to punish wall street firms, but rather to prevent the abuse and excess that nearly caused the collapse of many of these firms in the financial system itself. we cannot go back to business as usual, and when we see reports of firms once again engaging in risky bets to reap quick rewards, when we see a return to compensation practices that seem not to reflect what the country's been through, all that looks like business as usual to me. the financial industry has often launched a massive lobbying campaign, locking arms with the opposition party to stand in the way of reforms to prevent another crisis. that, too, unfortunately, is business as usual. and we're already hearing a human cry if wall street suggesting that this proposed fee is not only unwelcome, but unfair. that by some twisted logic it is
11:51 am
more appropriate for the american people to bear the cost of the bailout rather than the industry that benefitted from it even though these executives are out there giving themselves huge bonuses. what i'd say to these executives is this. instead of sending a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help earning have aed the fee i simply suggest you might want to suggest you meeting your responsibilities and the rescue not by sticking it to your shareholders or your customers or fellow citizens with the bill, but by rolling backbone uses for top earners and executives and more broadly, i am continuing to call on these firms to put greater effort into helping families stay in their homes, to provide small businesses with needed loans and to embrace rather than fight serious financial reform. ultimately, it is by taking responsibility on wall street,
11:52 am
here in washington, all of the way to main street, that we're going to move past this period of turmoil. that's how we're going to avoid the cycles of boom and bust that have caused so much havoc. that's how we're going promote vibe rabbit markets that reward innovation and entrepreneurship and hard work. that's how we're going to create sustained growth without the looming threat of another costly crisis. that's not only in the best interests of the economy as a whole, it's actually in the interest of these large banks. so i'm going to be working closely with congress on this proposal and on behalf of the american people, i'll look forward to signing it into law. thank you very much. >> our chief washington correspondent john harwood is standing outside the white house for reaction. john, pretty much what we expected to hear. was there anything there that was surprising? >> no. what surprised me most this morning, melissa, was the relish that the administration seems to feel in taking on this fight
11:53 am
with the president talking about obscene bonuses being paid on wall street, and suggesting a -- that wall street simply hasn't learned its lessons. he said, as you heard at the end of those comments that he's not trying to punish everybody. >> right. >> but it certainly seems that the administration has an adversary it seems comfortable engaging with right now. >> there's a left-wing populist rhetoric here, john, as you well know. this is a political ploy. look, you get right down to it, the banks he's singling out in the main have paid down t.a.r.p. and interest and the warrants. they're yielding a big profit. it's gm, it's gmac, it's fannie, it's freddie. >> aig. >> who gave the money to goldman. >> the $75 billion loan modification which has been a disastrous program. that's what they're trying to fund, john, and that's where i must say president obama was less than accurate today. >> well, a couple of things on that, larry. first of all, they do need
11:54 am
money. we have a big deficit and this is a source of money. second of all, aig would be hit in part of its activities by this tax and third, on the question about the auto companies and others who may be responsible for some of the losses, the argument is as follows that a, yes, you can't draw lines perfectly to satisfy everybody and satisfy everybody's sense of fairness, but that the mechanism here is similar to what the fdic imposes on insured deposits to fund its -- >> it's 15 basis points. >> that's the reason why they're -- >> it's 15 basis points. i agree, but the trouble with that is this is the second assessment because the fdic is assessing them, too. when we come back -- >> i'm sorry, larry, this is not levied on insured deposits and it's on the non-insured deposits. >> i understand. they've been levied on insured deposits and now they'll be levied on the uninsured deposity and that's what i mean by double tax. >> i'm wondering was it a bad
11:55 am
idea to take a bone thus year? >> no, no, john's going to come back. we're all going come back. >> there are rumors that the bush tax cut is extended. i want to put that in there. >> all right. we'll be right back.
11:56 am
11:57 am
11:58 am
okay. we want to bring you some news that's breaking right now. you can see the bottom of the screen. the crisis commission say they will call alan greenspan, chris cox and they're adding these to the people that they're going bring in and question about what happened and how it won't happen again. anyway, interesting people to add to the list there. back with us rid now is john harwood. we have james galbrent from the lbj school of public affairs from texas. mike calabria from the cato institute. let me get right to your reaction, gentlemen, to what we just heard from the president.
11:59 am
what do you think? >> i think the president gave a forceful speech and he connected with the american people with this and he enforced what the angelides commission was doing yesterday. so the timing and the content and analysis were good. the proposal itself doesn't impress me very much. i think it's inferior to a financial transactions tax and inferior to what the british did by taxing bonuses and it really doesn't get to the basic question which is that we really don't need all of the financial sector that we have. we very badly need to restructure it and to shrink it in a way that makes it more competitive and effective in the environment. >> our e-mail is going 5 to 1 surprisingly against to what the president is doing. >> i can't say i agree with it. i found it disingenuous in revisionist history for the most part. for starters, it's haines 101 that you don't raise taxes in a recession. even worse, he's talking down the equity of these banks. >> yeah. >> if you run down the equity

113 Views

info Stream Only

Uploaded by TV Archive on